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NFL QB Kaepernick Unable to Avoid Income Tax Sack

Earlier this week, the San Francisco 49ers have entered negotiations with starting QB Colin Kaepernick about extending his contract with a significant pay increase. According to reports, the 49ers star QB is seeking a contract worth the same as Dallas Cowboys QB Tony Romo and Chicago Bears QB Jay Cutler: roughly $18 million base salary per season. Considering that Kaepernick has led his team to the Super Bowl in his first season as a starter and the NFC Championship game this past season, his request is well warranted and hard to argue against. However, $18 million per season will not net the desired salary amount as his peer QBs, after taxes.

If Kaepernick wants to take home the same estimated amount as Tony Romo after taxes, an estimated $10.71 million, the San Francisco QB’s salary would need to be roughly $5.2 million dollars more. This is due to California having a top marginal income tax rate of 13.3 percent while Texas has no income tax. Hence making the total income tax burdens for each player 53.8 percent and 40.5 percent, respectively.

Assuming both Romo and Kaepernick reside in the states of the teams they play for, the breakdown of their tax burdens and liabilities are as followed:

Player

Total Income Tax Burden

State Income Tax Liability

Federal Income Tax Liability

Total Tax Liability

After Tax Earning

Tony Romo

($18 million per season)

40.5%

$0

$7.29 million

$7.29 million

$10.71 million

Colin Kaepernick

($18 million per season)

53.8%

$2.39 million

$7.29 million

$9.68 million

$8.32 million

Colin Kaepernick

($23.2 million per season)

53.8%

$3.1 million

$9.4 million

$12.5 million

$10.7 million

For illustrative purposes the Federal Income Tax Burden listed above is composed of the 39.6 percent tax bracket and 0.9 percent Medicare tax. Texas has no state income tax while California has a top marginal state income tax rate of 13.3%. This does not account for “jock tax” paid for away games or bonuses, endorsements, and other monetary compensation outside of base salary.

Even Chicago Bears QB Jay Cutler will walk away with more after-tax earnings in this salary scenario despite playing in Chicago, IL: total income tax burden is 45.5 percent, estimated after-tax earnings $9.81 million.

While Kaepernick may want to have a contract that says he will earn as much as Tony Romo and Jay Cutler, the reality is he simply can’t by playing and living in the state with the highest income tax rate. In fact, there are only 7 teams in the league (Dolphins, Bucs, Jaguars, Titans, Texans, Cowboys, and Seahawks) Kaepernick could play for that would allow him to truly earn “Romo money”. All of which are located in no-income-tax states.

An $18 million per year contract in California is no equal to the same contract in Texas. Perhaps the San Francisco QB should explore free agency if he wants to maximize his earning potential.